Crops Analysis | June 20, 2023
Price action: July corn futures rallied 3 1/2 cents to close at $6.43 3/4, while December futures closed unchanged at $5.97 1/2.
Fundamental analysis: Corn futures gave up overnight gains and closed mixed in a volatile session. Weather continues to drive the market and forecasts in the Midwest remain dry in the coming week with meaningful rainfall limited to the far southeastern and far northwestern portions of the region, although some localized pockets of precip will occur elsewhere, World Weather Inc says. While this summer has been dry, moderate temperatures have limited yield loss thus far compared to 2012 counterparts. Rain fell across portions of the corn belt with up to an inch in most places, allowing a temporary reprieve from dryness, but more rain is needed as temperatures start to ramp up seasonally.
Outside markets did not help the corn market today with a slightly stronger dollar, weak crude market, and plunging safe-haven gold and silver. Markets were skittish ahead of Fed chairman Powell’s monetary policy report on Capital Hill tomorrow and Thursday, which are expected to be a repeat of last week’s comments indicating a more hawkish stance going into the latter half of the year.
Crop consultant Dr. Michael Cordonnier cut his estimate for U.S. corn production by 1 bu. per ac to 177 and maintains a neutral to lower bias. He has maintained his view that the crop has sustained irreversible yield loss due to the extensive dryness. He has increased his estimate of the Brazilian corn crop by 1 MMT to 130 MMT as recent rains have helped yield prospects for safrinha second crop corn, which is estimated to be 5% harvested according to an AgRural estimate, compared to 11% a year-ago. Brazilian corn will be hitting the world markets in short order, taking advantage of the recent price rise of U.S. corn and will pressure prices.
The USDA is expected to release the most recent crop progress report this afternoon, delayed due to Monday’s federal holiday. A Reuter’s survey of 11 analysts showed conditions dropping three points from last week to 58% “good” to “excellent” to the lowest reading since 2019. Inspections data set to be released this morning was delayed to technical difficulties in data collection.
Technical analysis: July corn futures pushed higher overnight and on the open this morning before facing selling pressure in the middle of today’s session before rallying back to green on the close. Bulls remain well in control of the technical advantage. Bulls were able to extend above the 200-day moving average, continuing the recent rally, although shorter term moving averages remain well below the current market as prices have risen aggressively in the last few sessions, putting the market at risk to corrective selling. Price neared $6.50 resistance with today’s high coming in at $6.47, which essentially matches the April 18 high and will remain initial resistance Wednesday. Additional resistance comes in at $6.59. Today’s low will mark initial support at $6.35 1/2, backed by the 200-day moving average at $6.28 1/4. Additional selling pressure will be met with support at $6.17.
What to do: Get current with advised sales. Be prepared to make additional sales on additional price strength.
Hedgers: You should be 85% priced in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on 2023-crop, with 25% reowned in December $5.70 call options short-dated to August (July 21 expiration) at 17 cents.
Cash-only marketers: You should be 85% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: July soybeans rose 10 3/4 cents to $14.77 1/4, the highest close since April 19, while November futures rose a 1/2 cent to $13.42 3/4. July meal fell $3.60 to $412.80, while July soyoil closed at 59.63 cents, a modest 6-point loss.
Fundamental analysis: Traders spent the session evaluating forecasts as longer term forecasts show prospects for increased moisture throughout areas of the Midwest. Outside markets were largely unsupportive as the U.S. dollar nudged higher, while crude oil edged lower amid forecasts of slower growth in China; the second largest oil consumer. USDA’s weekly export inspection data remained unreported through the session due to technical difficulties with data collection. Pre-report estimates ranged from 100,000 to 300,000 MT for week ended June 15.
Crop consultant Dr. Michael Cordonnier trimmed his U.S. soybean production forecast by 0.5 bu. to 51 bu. per acre, noting that while estimating soybean yields in the third week of June is a “tricky proposition,” it is “time to be a little more cautious concerning the U.S. soybean crop.” World Weather Inc. forecasts the Midwest to see restricted precip for another week to ten days, with some increases in shower and thunderstorm activity possible next week, offering a little more potential relief from recent drying.
USDA will release crop condition ratings following the close, delayed a day due to Monday’s holiday. A Reuter’s poll suggests the corn crop will decline 3 percentage points, with 58% of the crop rated “good” to “excellent.”
Technical analysis: July soybeans gapped 6 1/4 cents higher overnight, and notched an intraday high of $14.89 1/4, ultimately filling the April 19/20 gap between $14.78 3/4 and $14.76 1/2. Initial resistance of $14.81 1/4 was tested but held steady into the close and will continue to serve up a battle for bulls. However, a further breach of the level will likely increase momentum towards $15.00, with $14.95 3/4 acting as resistance before the psychological area is achieved. A turn above $15.00 will then see additional resistance at $15.23 1/4. Conversely, solid support lies at the 200- and 100-day moving averages of $14.50 3/4 and $14.44 1/4. Success below the area will likely induce stronger selling efforts towards the 10- and 40-day moving averages, currently trading around $13.99 1/2 and $13.81 1/2. From there, the 20-day moving average of $13.63 1/2 and the May 31 low of $12.70 3/4 will serve up additional support.
What to do: Get current with advised cash sales. Be prepared to advance sales on additional price strength.
Hedgers: You should be 80% priced in the cash market on 2022-crop. You should have 10% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 80% sold on 2022-crop. You should have 10% of expected 2023-crop production forward sold for harvest delivery.
Price action: July SRW futures rose 7 3/4 cents to $6.95 ¾, ending near the session high. July HRW futures fell 6 cents to $8.36, marking a mid-range close, while July spring wheat fell 4 1/2 cents to $8.49.
Fundamental analysis: Wheat futures ended the session mixed as winter wheat harvest accelerates and continues to pressure markets. Price continues to correlate well with both corn and soybeans which are facing volatility in a weather market and technical pressure as conditions are overbought. The looming July 18 Black Sea deal deadline also hangs over the market, with traders expecting Russia to refuse renewal, although negotiations are expected to take place in the interim.
Weather in the central plains remains too wet contrary to key corn production areas. Pockets are expected to receive “too much” rain which could lead to additional flooding and raises concerns over wheat quality, World Weather Inc says. Wednesday and Thursday are expected have the greatest rains, although precip is expected to decrease after Friday, likely accelerating winter wheat harvest. The northern plains are forecast to receive some necessary meaningful rain over the next week, leading to a much-needed increase in topsoil moisture.
The USDA is set to release the weekly crop progress report this afternoon, with winter wheat conditions expected to remain the same at 38 and winter wheat harvest expected to rise 11% to 19% completed. Spring wheat conditions are expected to fall two points from last week to 58% “good” to “excellent”.
Technical analysis: July SRW futures rallied into the close to post the second consecutive close above the 100-day moving average at $6.82 3/4. Futures proved resilient in the face of weakness in the corn and soybean markets with today’s high coming right at $7.00 resistance. The break of either of these levels will be significant and will likely be dictated by outside markets. Additional resistance comes in at $7.15 which capped all gains in March and April. If bears manage to turn recent bullish strength around, firm support can be found at $6.63.
July HRW futures were unable to maintain spillover strength as 200-day moving average capped gains for the second session in a row. Price was balanced between 200-day resistance and 100-day support at $8.48 and $8.32 1/2, respectively. Harvest will continue to hover over futures, though consolidation continues, with prices largely stuck in the sideways range dating back to July of last year. Bulls are targeting significant resistance at $9.00 while bears are aiming to take out support at $7.80, which has capped all the downside in June.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December cotton rose 60 points to 80.70 cents, after trading as high as 81.20 cents.
Fundamental analysis: December cotton inched higher as hot, dry weather in West Texas largely negated outside market pressure. Adding caution to the general marketplace today is investor anticipation of Federal Reserve Chair, Jerome Powell’s semi-annual monetary policy report to Congress on Wednesday and Thursday. While a repeat of last week’s post-Fed meeting comments is expected, the marketplace will tune in for any fresh clues of the timing of additional rate increases, which Powell alluded to last week.
World Weather Inc. states while too much rain may negatively impact a few cotton areas in the southeastern U.S. for a while longer, southwestern counties of West Texas are likely to become too dry very quickly because of no rain and persistently hot weather. However, the forecaster indicates a few showers are expected in West Texas later this week into next.
USDA will release updates to planting progress and condition ratings following the close, delayed a day due to Monday’s holiday.
Technical analysis: December cotton gathered sufficient momentum to test resistance at 80.80 cents along with the 10-, 20- and 40-day moving averages of 80.92, 80.94 and 81.15 cents, respectively. While bull efforts were unsuccessful, further attempts to breach the areas will ultimately find additional resistance at 81.50 cents, and again at the technically significant 100-day moving average of 82.30 cents. Conversely, a turn lower will continue to find initial support around 80.14 cents, with stronger support around 79.44 cents. From there, support lies at 78.78 cents, then at the May 25 low of 78.45 cents and again at 78.08 cents.
What to do: Get current with advised sales. Be prepared to advance sales on a test of the winter highs.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should be 50% forward-priced on 2023-crop for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should be 50% forward-priced on 2023-crop for harvest delivery.
